The market of boilers – triumph of automation

According to the Renewable Energy Institute, during the next 4 years ca. 15 billion EURO will be invested in renewable energy sources in Poland. What portion of this amount will be allocated for the purposes of biomass-fired heating equipment? It may turn out that even higher than the experts assumed so far.

The market of biomass-fired boilers, like the whole sector of RES equipment manufacturing, in 2015 and at the beginning of 2016, waited for specific legal solutions. However, despite the turmoil associated with the act on RES and prosuments, the industry may experience dynamic growth. According to the President of the Renewable Energy Institute, by 2030, it may employ ca. 100 000 individuals, i.e. by 66 000 more than now.
The said turmoils can be especially observed in the sphere of electricity production in biomass-fired power plants. According to the data of the Energy Regulatory Office, their total installed power at the end of 2015 amounted to 1122.670 MW. It is far more than in 2014 (1008.245 MW) and 2013 (986.873 MW). Unfortunately, the 1st quarter data indicate that Poland, as of the end of March 2016, made a step back in this area when compared to the turn of 2014/2015. The total installed power of the biomass-fired power plants amounted to as little as 1003.115 MW. Luckily, the heat engineering industry is doing better. By the end of 2015, PGNiG Termika was able to produce, for the first time, energy from a boiler combusting 100% biomass in Siekierki CHPP. It is assumed that the boiler will burn ca. 300 000 tons of biomass yearly. At the beginning of July 2016 the biomass-fired combined heat and power plant in Lębork started operations.
According to the latest report from the Renewable Energy Institute1, the REI database recently added 10 new companies manufacturing RES or auxiliary equipment, and 2 of them conduct their activities in the biomass industry. Currently the REI database holds 24 enterprises manufacturing machines and equipment utilizing solid biomass, which constitutes 9.6% of all the entities producing equipment for RES industry. However, these 24 companies need to be supplemented with enterprises that deal with boilers manufacturing as a secondary activity, e.g. in addition to production of boilers fired with other solid fuels. The REI report from 2015 included 72 manufacturers of equipment that utilize biomass as an alternative fuel. Despite the fact that the Institute did not draw up a similar report in 2016, it might be assumed that the number of entities offering biomass-fired boilers is currently around 100.

Automated pellet-fired boilers are the most popular

As results from the data of the Renewable Energy Institute presented in 2015, manufacturers of heating equipment suitable for biomass combustion offer, in particular, automated boilers for burning wood pellet (ca. 40%). Other considerable categories are boilers combusting biomass in various forms (27%) and boilers combusting wood edgings (15%). The offer of chip-fired boilers constituted ca. 5%, cubed or bailed straw-fired boilers – 4% and equipment operating on the basis of wood gas treatment process – a further 9% of the market.
This data confirms the observations made by other organizations from associated industries. The Association of Manufacturers and Importers of Heating Equipment, in its 2015 report “Summary of trends in civil construction, installation and heating market” stated that “the activities taken by the leading manufacturers of solid fuel-fired boilers aimed at development of biomass-fired boilers, which are also becoming more and more popular, are a trend occurring for a considerable time now. It mainly applies to pellet-fired boilers, but also chip-fired ones”.2
Most consumers choose automated boilers, since they offer a significantly higher efficiency parameter (over 90%, even up to 94%) than those operated manually (ca. 80%). Customers claim that it will compensate the higher unit price of automated boilers. Operating comfort or the possibility to integrate them with other systems are also important features.
The price of heat production and relatively easy replacement of one solid fuel with another one are still essential for customers owning single-family houses, who conduct modernization or install new heating systems. These are the reasons behind the popularity of boilers that utilize coal as the primary fuel and biomass as a replacement or alternative fuel. According to the estimates of the REI from 2015, these included ca. 69% of all sold boilers. In turn, the sale of equipment solely dedicated to biomass combustion is ca. 1/4 of the market.

35% of Poles think about buying a RES system

However, this percentage might increase in the future. As results from the Report of TNS Poland, “The public opinion survey on renewable energy sources (RES)” conducted in November 2015, as much as 35% of the respondents declared future investments in RES, out of these 13% intend to try it in the course of 2 years. These are predominantly individuals with a relatively high income, with children, inhabitants of single-family houses or rural areas.

Although there are no current data that would precisely determine the number of biomass-fired boilers sold throughout 2015 and at the beginning of 2016, the data from the ERO, the REI or industry organizations might lead to the conclusion that it will be a level close to that of 2014. At that time, the manufacturers of biomass-fired heating equipment sold 26 000 boilers with a total power output of ca. 650 MW.
Equipment in the 1 200 to 2 100 EURO pricing range constitutes the most common offer among the most popular 10-30 kW boilers; however, customers may also find offers priced at ca. 3 500 EURO for equipment with a 20 kW power output. Regarding boilers exceeding a 100 kW power output, the price oscillates between 2 500 and 4 200 EURO, but also here, the price for the equipment of 150 kW output power might reach almost 14 000 EURO. The charge for a boiler with a lower power output is ca. 45-75 EURO per 1 kW. As far as boilers with higher power output are concerned, the price drops down from 20-50 EURO per 1 kW. The final price is influenced not only by equipment power output, but also the quality of the combusted fuel, the level of automation and the class under PN EN 303-5:2012 standard that determines the criteria for emission and efficiency of boilers. Post-sale service and duration of warranty for equipment and its components are also important factors.

On the basis of data from the ERO, the REI and industry organizations, it might be assumed that the total number of the biomass-fired boilers sold in the previous year and first quarter of 2016 amounted to ca. 26 k.

Export predominantly to neighbouring states

The export of Polish equipment to our Eastern neighbours, Lithuania and Ukraine, is increasingly intensifying. Due the relatively large-scale production of pellet in the Baltic countries, Latvia and Estonia are also extremely significant markets for Polish manufacturers of biomass-fired heating equipment. As results from the report prepared by the Renewable Energy Institute, in July 2015 export to all of our neighbours (Germany, Czech Republic, Slovakia, Ukraine, Belarus, Lithuania and Russia) amounted almost to 59% and export to only three of these countries – Lithuania, Ukraine and Czech Republic – constitutes more than 40% of the entire export of biomass-fired boilers. The bigger importers of Polish biomass-fired boilers also include Bulgaria, Ireland, France, Slovenia, Hungary and Moldova – export to these states amounted to further 38% in total.
In the situation when the domestic market is somewhat unstable, export may become a very important support of activities of Polish companies manufacturing biomass-fired boilers. A lot of estimates indicate that investments in the broadly-understood RES may even exceed 500 billion USD worldwide. Moreover, the statements by the President of the European Commission claiming that the EU is to became the RES leader may positively incline those companies that already export or intend to export its products to the European market. Furthermore, it is already known that the EU wants at least 27% of the consumed power to be generated from RES by 2030.

What are the industry perspectives?

According to the estimates of the Renewable Energy Institute, on the basis of the still valid assumptions accompanying KPD (the National Activities Plan), the increase of biomass-fired boilers should reach 2 000 MW, and by 2020, investments in this branch of industry should reach ca. 700 millions EURO. If such a scenario is to come into fruition, it would in fact mean a slower growth of the industry than in the 2-3 previous years. However, a lot of things indicate that we will deal with a more optimistic scenario. Nevertheless, a lot depends on the legal regulations regarding prosuments support or regional solutions applied to fight smog. As results from REI calculations, currently generating heat for a 100 m2 house with a biomass-fired boiler costs ca. 24 EURO/GJ. Such heat energy is thus, on average, 11 EURO more expensive than systemic heat and 4,5 EURO more expensive than individual heat sources utilizing fossil fuels. Without sufficient biomass support it will be hard to convince customers to choose a biomass-fired boiler instead of a coal-fired one. Especially considering the fact that some of the local authorities are already declaring that they will provide financial support to natural persons in replacing their furnaces, provided that the equipment complies with proper quality standards regarding emission (class 4 or 5) and they view the fuel type as a matter of second-rate importance.
However, statements by the government representatives indicate that biomass may become one of the basic RES used in Poland. Krzysztof Tchórzewski, the head of the energy department, ensures that the government is willing to engage in discussions with the European Commission on the possibility of evenly-distributed support of wind technology, photovoltaics and biogas plants as well as the possibility to use local biomass more. The agriculture department also wishes local biomass to become one of the additional sources of income for farmers. It is supposed to contribute to increased per capita income in rural households.
One of the crucial aspects that may turn out significant for the industry manufacturing biomass-fired equipment is the change of the prosument definition in the amended act. Now, it may even include a natural person or a farm without the necessity to register a company, as it was the case previously.

Local authorities can support the industry

A lot may depend on actions taken by the local authorities, both communes and voivodeships. For instance, in the Lubartów commune (the Lublin voivodeship) in March citizens were offered financial support regarding RES equipment investments. The support in the case of biomass-fired boilers was to amount to as much as 85% of the eligible costs.
Rybnik is one of the cities that is implementing this task, as the city is struggling with the issue of air pollution in the heating season. Only in 2016 the city hall intends to allocate 700 000 EURO in funding for the replacement of furnaces that do not comply with quality standards. Owners of single-family houses are eligible for the programme – they may replace their obsolete furnaces with, i.a. a biomass-fired boiler with a proper quality class. The amount of support is to be from 700 to 2 300 EURO depending on the completed investment. In the following years Rybnik will continue to provide this kind of support, for which as much as 7 000 000 EURO has already been earmarked.

Local authorities in voivodeships may properly support RES industry development, including the manufacturers of biomass-fired heating equipment.

On the other hand, the local authorities in voivodeships may properly support RES industry development, including the manufacturers of biomass-fired heating equipment. For instance, the Lublin Voivodeship offers financing as a part of Regional Operative Programme under Activity 4.1 – Support of RES usage. Those entities that carry out construction or reconstruction of the infrastructure used to generate energy from renewable sources, construction or retrofitting of units generating electricity and heat that primarily utilize solar energy and biomass may count on reimbursement of some of the expenditures.
What is important, the National Fund for Environmental Protection and Water Management is also engaged in RES support. In July, the Silesia department of the Fund launched a pilot programme, as a part of which natural persons owning single-family houses may obtain a refund of up to 25% of the costs incurred in relation with purchasing and installation of heat sources, also biomass-fired boilers (class 4 or 5).
However, the details regarding the types of solutions to be applied and their impact on the market are to be disclosed not earlier than in a couple of the following months. Let’s hope those changes are positive. •

References

1. Polski przemysł produkcji urządzeń dla energetyki odnawialnej, Instytut Energetyki Odnawialnej, Warsaw, April 2016
2. http://www.spiug.pl/raporty206/podsumowanie-trendow-rynku-budowlanego-i-instalacyjno-grzewczego-w-iv-kwartale-2015-r-i-calym-2015-roku

PAWEŁ MIKOS